Prepared remarks
Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the Second Quarter Ended June 30, 2026. My name is Liz, and I will be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the second quarter of 2026 in a press release, a copy of which is available in the Investor Relations section of the company's website at www.doubledowninteractive.com. You can find a link to the investor relations section at the top of the home page. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim and its CFO, Mr. Joseph A. Sigrist. Following their remarks, we will open the call for questions. Before we begin, Joe Jaffoni, the company's Investor Relations Advisor, will make a brief introductory statement. Mr. Jaffoni?
Thank you, Liz. Before management begins their formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We hereby claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements about future events and include expectations and projections, not present or historical facts, and can be identified by the use of words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate, or other similar terms. Forward-looking statements include, and are not limited to, those regarding the company's future plans, mergers and acquisition strategy, strategic and financial objectives, expected performance, and financial outlook.
Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's annual report on Form 20-F filed with the SEC on 03/31/2026 and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of this call. The company does not undertake and expressly disclaims any obligation to update or alter the forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. During today's call, management will discuss non-IFRS financial measures, which management believes to be useful in evaluating the company's operating performance.
These measures should not be considered superior to, or in isolation or as a substitute for, the financial results prepared in accordance with IFRS. Full reconciliation of these measures to the most directly comparable IFRS measure is available in the earnings release issued this afternoon. In addition, on April 29, 2026, DoubleDown issued a press release acknowledging the receipt of a nonbinding expression of interest from WGames, its controlling shareholder, to acquire all the outstanding DoubleDown common shares, including ADRs not currently owned by them, at a price of $11.25 per ADS in cash. As noted in that press release, the company has formed a special committee to evaluate and negotiate with the controlling shareholder and determine the next steps that would be in the best interest of the company and its unaffiliated shareholders. As a result of this ongoing process, the company has no additional updates or further comments to discuss on today's call.
I would like to remind everyone that today's call is being recorded and will be made available for replay via a link in the Investor Relations section of DoubleDown's website. Thank you for your patience with that, and it is now my pleasure to turn the call over to DoubleDown's CEO In Keuk Kim.
Please go ahead.
Thank you, Joe. Good afternoon, everyone. We are delighted to be with you today to discuss DoubleDown Interactive's second quarter 2026 results. Key highlights include delivering revenue consistency and resiliency as we execute on our growth and geographical diversification strategies, marked by solid contributions across both social casino and iGaming; delivering a record contribution of over 50% of our total social casino revenue from direct-to-consumer payer activity; and delivering another quarter of strong profitability and significant free cash flow generation. These results further reinforce our confidence in our business model as we drive operational excellence across our portfolio. Let's start with the financial results. This afternoon, we reported second quarter consolidated revenue of $94.3 million, up approximately 11% year over year. This top-line growth helped drive second quarter adjusted EBITDA of $39.3 million, marking 17% year over year growth.
In Q2, we extended our track record of driving a high conversion of revenue to profit and cash flow. Net cash flow from operations was $24.6 million in the quarter, up 25% from the same period one year ago. As a result, we generated a total of $71 million in net cash flow from operations for the first half of 2026. Our social casino segment remains the primary engine of DoubleDown's profit and cash flow generation. In the second quarter, social casino revenue grew 11.5% year over year to $77.3 million, driven by the contribution from WHOW Games, as well as the strong performance of the DoubleDown traditional social casino business. A key highlight this quarter is the continued growth of our direct-to-consumer, or DTC, component — a major contributor to our strong growth in profitability. In the second quarter, DTC accounted for 52% of total social casino revenue compared to just over 15% in the second quarter of 2025 and 44% in the first quarter of 2026.
At the same time, industry analysts at Eilers recently forecast that the global social casino market will decline over 5% in 2026. That said, our focus continues to be on outperforming the overall market through precise execution of our product development initiatives around player and pay retention, optimization of marketing and live ops activity to maximize payer conversion and purchasing activity, and continued maximization of the direct-to-consumer opportunity. Turning to our iGaming business. SuprNation's Q2 2026 revenue was $17 million, an increase of 10% year over year. Our newest iGaming casino title Las Vegas again contributed to the strong SuprNation result in the quarter. During the second quarter, the SuprNation team did an excellent job in managing around the recently introduced higher UK gambling tax rate through a combination of product changes, marketing adjustments, and efficient controls.
This allowed our iGaming business to effectively mitigate much of the impact of the tax increase. Our second quarter results highlight how prudent, targeted investments are uncovering growth opportunities, which is enabling DoubleDown to extend our long-term record of strong profitability and cash flow generation. We are successfully integrating previous acquisitions while optimizing our core DoubleDown business. M&A remains a strategic priority as we continue to evaluate opportunities in online gaming and mobile entertainment that meet our criteria to enhance long-term shareholder value. Now I will turn the call over to our CFO, Joe Sigrist, to walk us through the financials before providing my closing remarks. Joe?
Thank you, IK, and good afternoon, everyone. To review revenues for the second quarter of 2026, we were $94.3 million. This compares to total company revenues of $84.8 million in the second quarter of 2025 and $94.1 million in Q1 of 2026. Our social casino segment grew 11.5% from the second quarter of 2025 to $77.3 million, reflecting the inclusion of revenue from WHOW Games, which we acquired in July of last year. iGaming revenues grew by $1.5 million, or 10% year over year, to $17 million. Regarding our overall social casino KPIs, we previously mentioned that the metrics from WHOW Games are somewhat different from those of DoubleDown Casino. Specifically, WHOW Games experiences a higher payer conversion rate and lower average monthly revenue per payer. With this in mind, overall social casino KPI highlights for the second quarter include the payer conversion rate — which is the percentage of players who pay within the social casino apps — increased to 9.4% in Q2 2026 compared to 7.0% in Q2 2025.
The average revenue per daily active user, or ARPDAU, was $1.42, up from $1.33 in Q2 2025. And an average monthly revenue per payer at $218 in Q2 2026, down from $286 in the prior year period. In the second quarter of 2026, operating expenses were $57.8 million compared to $52.4 million in the second quarter of 2025. The increase primarily reflects the inclusion of WHOW Games expenses. Sales and marketing expenses for the second quarter of 2026 were $13.9 million compared to $13.1 million in the second quarter of 2025, which again did not include WHOW Games. Conversely, sales and marketing expenses in the second quarter were down from Q1 2026, primarily due to a reduction in player acquisition spending at SuprNation in light of the revised iGaming tax rate in the U.K. Profit excluding noncontrolling interest for the second quarter of 2026 increased 50% to $32.9 million, or earnings per fully diluted common share of $13.27, or $0.66 per ADS, in the second quarter of 2026 compared to profit for the prior period of $21.8 million, or earnings per fully diluted common share of $8.82, or $0.44 per ADS, in Q2 2025.
The increase primarily reflects higher revenue, the lower cost of revenue attributable to a higher proportion of DTC revenue, and a higher unrealized gain on foreign currency, partially offset by higher overall operating expenses primarily due to the inclusion of WHOW Games and increased costs associated with revenue growth from SuprNation. Adjusted EBITDA for the second quarter of 2026 rose to $39.3 million compared to $33.5 million for the second quarter of 2025 and $38.2 million for Q1 2026. Adjusted EBITDA margin was 41.6% for Q2 2026, as compared to 39.5% in Q2 2025 and 40.6% in Q1 2026. Net cash flows provided by operating activities in Q2 2026 were $24.6 million compared to $19.7 million in Q2 2025 due to higher profit and lower income tax paid. As IK mentioned, net cash flows provided by operations were $71 million for the first half of 2026. In light of Q2 2026's meaningful cash generation, at quarter's end we had $554 million in cash equivalents and short-term investments with a net cash position of approximately $521 million, or approximately $10.52 per ADS. Now I will turn the call back to IK for closing remarks.
Thank you, Joe. DoubleDown Interactive, powered by our core social casino and iGaming businesses, delivered another quarter of strong profitability and cash flow. Building on our solid first half of 2026, we remain committed to innovation and disciplined, high-ROI investments to drive DTC revenues, which collectively optimize social casino margin. Finally, our strong balance sheet and cash position provide us the financial flexibility to pursue strategic growth opportunities as well as additional value-building initiatives and transactions for our shareholders. We are now happy to take your questions. Liz?
Questions and answers
If you would like to ask a question at this time, please press * and wait for your name to be announced. Our first question comes from Eric Handler with ROTH Capital.
Hey, guys. This is Jack Weissberger on for Eric. Thanks for taking our question. I want to focus on iGaming. Is there anything in particular that drove down the quarter-over-quarter decline? Could it have been related to user acquisition costs, maybe the U.K. tax changes, anything on that would be helpful.
Yeah, sure, Jack. That is fine. I mean, essentially Q2 was down very slightly — essentially flat from Q1. And we certainly, as IK earlier expressed, had to, as we started Q2, deal with the significant increase in the tax rate starting on April 1 in the U.K. And so we made certain product adjustments and marketing adjustments, as I think I mentioned, we spent significantly less in player acquisition investment in Q2 as we wanted to see how the various competitive larger competitors played out as they also dealt with the U.K. tax change. And so all that put together kind of moderated our sequential growth in revenue. But at the same time, we are quite pleased with the impact on player retention and how we remained, I think, very cost conscious during the quarter, recognizing the increase in the tax rate. So I think we were able to mitigate at least on the expense side and certainly on the profit side the impact of the tax increase.
That all makes sense. Then also on free cash flow, you had nice year-over-year improvement in the first half. I know you mentioned some income tax timing or maybe there is some seasonality as well. Should we see more of a headwind due to that income tax timing year over year in 2H? Should we think about free cash flow for the year?
Yeah. I mean, Q2 generally is when we have tax payments due. So it really is, you could call it, seasonality. We have seen this over the last few years that from a cash flow generation standpoint because of tax payment timing, Q2 tends to be kind of a low watermark when it comes to quarterly cash flow.
Our next question comes from Aaron Lee with Macquarie.
Hey, guys. Good afternoon. Thanks for taking the question. I am curious to hear more about the U.K. tax increase. Can you just talk a bit about how trends were post the tax increase as you layered on your mitigation? Has there been any change in how you are thinking about mitigation? And maybe to tie it all together, how should we be thinking about the trajectory of SuprNation going forward in terms of both revenues and profits? Thank you.
Yeah, Aaron. It is really important to understand that we are trying to balance a significant change — essentially an increase in the cost of doing business in the U.K. — trying to balance revenue growth with profit and returns on the business that we purchased a few years ago. As we look over the last, now it's been about 4.5 months since the tax increase occurred, and since we are able to observe what some of our larger iGaming competitors are doing in the market, we feel like we have struck a good balance between revenue and profit. We do not want to lose sight of the fact that we are still going to invest in acquiring players, but we are also going to make sure that we appropriately spend the money to get the returns that we need relative to that investment and make the right product adjustments, whether it be RTP, bonus rates, those kinds of things, to also balance the revenue and profit equation.
Okay. Got it. That makes sense. And then with regard to marketing, especially for SuprNation marketing, do you expect to stay at these reduced marketing levels, or do you see opportunities to kind of increase that in the back half? Any general thoughts on how you are thinking about marketing in the second half of the year would be helpful.
Yeah. If you look at our marketing spend over the last few quarters, it's really been fairly constant. And we see that being true for the rest of the year at least. We are looking to balance invest on our iGaming side versus the social casino side, recognizing that we have to invest to acquire new players in both businesses. A lot of what we do is make near-real-time adjustments based on the ROIs that we are seeing from various markets with various agencies. But I do think that our more recent run rate is pretty much where we are going to be for the rest of the year.
Our next question comes from Josh Nichols with B. Riley.
Yes. Thanks for taking my question. The direct-to-consumer crossing the 50% threshold stood out — that is well in excess of where you thought you would be at this time of the year. Is there, I guess, a realistic ceiling in place or a point where you think some of those additional gains may stop dropping to the margin line? Or what is your expectation for where that could wind up by, say, year end?
Hi, Josh. Let me take the question. Our 50% ratio share is already an industry benchmark, but we have seen more room for further growth. Our consistent strategy is to migrate valued users step by step to our own platform while maintaining a healthy balance across mobile app stores by combining strong in-house DTC-related technology with real-time targeted features. We are not just reducing fees, but deepening user trust. So we have been proactively investing in our DTC capability, particularly in owned channels, direct CRM, and payment infrastructure, which allow us to communicate and transact with valued players more efficiently outside of traditional platform constraints. We are not just reducing fees but deepening user trust. I expect this focus on DTC integration to drive steady incremental growth and sustain our leadership in the market. Hope this helps. Thanks.
No, thanks for the granularity. Can you break out — you touched on it a little bit — but what is the organic social casino growth if we strip out WHOW? I know you did mention Eilers & Krejcik projecting social casino revenue generally to be down 5% this year, but also that you expect to outperform that. Are you currently trending in line with industry expectations or a little bit better, or how should we think about that?
Yeah. I mean, without quantifying it directly, we are really quite happy with the first half of the year on the social casino side and where both on the traditional DoubleDown side as well as on the WHOW side, we have pretty much been able to more than hold our own relative to what is a declining market. I will say the market is contracting based on both what Eilers & Krejcik say and what some of our competitors have publicly reported, but we have been able to do incrementally better at least so far in the first half of the year.
And then last question for me. I know you are not going to give any commentary on the reviews for the special committee, but is there anything you could say about the timeline? Is there a potential resolution expected before the next earnings report?
As Joe mentioned upfront, we just have nothing to report regarding the work of the special committee on the WGames proposal. The special committee is working diligently, and we certainly look forward to hearing from them when progress has been made. We are committed with the special committee to communicate any and all progress when it is appropriate.
Our next question comes from David Bain with Texas Capital Bank.
Great. Thank you. First, IK and Joe, great execution for the quarter. Maybe first to follow up on Aaron's question: as you saw in Q2, the industry leader planned to curtail some spend in the back half in terms of promotions. So I am just wondering if that is a sign that the industry generally is becoming more rational or is it reactive to some sort of new consumer indicator? I know Joe mentioned the run rate for you guys will likely stay the same, but given the environment, could that be beneficial and can you lean into that potentially in the back half to acquire users?
I am sorry, David — do you mean on the iGaming side or social casino?
No, on the social casino side.
On the social casino side, we have been spending within a fairly narrow range for quite some time. I think towards the end of Q1 we started to see ROAS and our ROI on acquiring new players getting better, so we leaned into it a bit. That moderated as we got into Q2, so we pulled back slightly. I do not think there is a huge variation from quarter to quarter in social casino from our perspective in how we view acquiring new players because it is all based on near-real-time calculation of returns, like 21-day returns on acquiring new players, and that informs our spending. We pride ourselves on being quite disciplined in that, and we will continue to be that way.
Okay. Great. And then a follow-up on the DTC comments. Obviously in social you guys are higher than the highs reported in the past. I am just wondering if you could speak to any balancing act with DTC and revenue growth. We have seen some checks citing smaller operators outperforming larger for the first time in a long time in social. I was wondering if maybe that was some of that leaning into DTC by the bigger players or is it not — are you not seeing any sort of revenue balancing that needs to occur at this point?
To be honest, our growth in DTC, which has been quite dramatic, is not on the back of just getting more benefits. We have always been very sensitive to not wanting to overly inflate our economy or be too generous inappropriately relative to the offers that we give, including the incentives for direct-to-consumer. A lot of what we have done to get this kind of growth is to implement DTC really well and to reduce or near eliminate the friction of the alternative payment path. Yes, there are some additional benefits for the payer, but it is nothing that we think has negatively impacted our revenue.
Thank you. This concludes today's conference call. Thank you for joining us today. You may now disconnect.